The Effect of Top-Employee Migration and Spin-Offs on Incumbent Firms

31 Pages Posted: 30 Mar 2012 Last revised: 26 Jun 2012

Pernille Gjerløv-Juel

Aalborg University - Department of Business and Management

Michael S. Dahl

University of Aarhus - School of Business and Social Sciences

Date Written: June 26, 2012

Abstract

Spin-offs are know to be superior performers compared to other de novo entrants. Spin-offs are thus expected to accrue greater and more long-term welfare effects than other start-ups, but if spin-offs are founded on the intellectual capital accumulated at their parent firms, they may be potentially harmful to those firms. However, similar effects on the performance of parent firms might be expected for top-employee migration to rival incumbent firms, or even for top employees who migrate to non-competitive destinations. Using the comprehensive Danish linked employer-employee database, we investigated how top-employee migration to spin-off, rival incumbent firms, and non-competitive destinations affect parent firms' hazard of exit, sales growth and employment growth. We found negative performance effects from top-employee migration independent of where employees migrate. Although departures of top employees to spin-offs were found to have negative effects on parent-firm performance, and this negative effect is greater than for the non-competitive departures, the effect is not significantly different from that of top employees who move to competing incumbent firms. We studied this phenomenon using different methods, including matched models adjusting for parent-firm heterogeneity.

Keywords: spin-offs, executive migration, top employees, performance

Suggested Citation

Gjerløv-Juel, Pernille and Dahl, Michael S., The Effect of Top-Employee Migration and Spin-Offs on Incumbent Firms (June 26, 2012). Available at SSRN: https://ssrn.com/abstract=2031395 or http://dx.doi.org/10.2139/ssrn.2031395

Pernille Gjerløv-Juel (Contact Author)

Aalborg University - Department of Business and Management ( email )

Denmark

Michael Slavensky Dahl

University of Aarhus - School of Business and Social Sciences ( email )

Department of Management
Bartholins Allé 10
Aarhus C, 8000
Denmark

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